Banking on Mitigation

Although the Clean Water Act protects U.S. wetlands, every year
thousands of acres of swamps and marshes are legally destroyed and
converted into golf courses, shopping malls and other forms of dry,
lucrative ground. Since 1989, the goal of wetlands policy has been
to achieve "no net loss," but that remains an elusive
target. Under current guidelines, developers whose projects will
impinge on natural wetlands can receive permits allowing
construction in return for agreeing to offset the damage through a
process known as compensatory mitigation. The two most common forms
of this practice are individual mitigation, in which developers
build compensatory wetlands themselves, and mitigation banking, in
which developers purchase credits from companies (mitigation banks)
that have restored or created wetlands nearby.

In theory, it's a pretty straightforward system—for each acre
of natural wetland lost there should be at least one acre created or
restored. But a 2001 study by the National Research Council
concluded that despite mitigation efforts the country was losing
about 60,000 acres of wetlands annually. Last spring, in an attempt
to improve the process, the U.S. Army Corps of Engineers proposed
new regulations that would force developers to meet
stricter—that is, more expensive—standards for
individual mitigation sites, which might make mitigation banks seem
like a bargain in comparison.

According to the Corps, increased use of mitigation banking will
address many of the problems that have kept "no net loss"
from being realized. But a number of studies, and quite a few
scientists, dispute the benefits of mitigation banks—and
question whether it's even possible to engineer successful wetlands.

"How do you re-create something that took nature a thousand
years to develop?" asks Joy B. Zedler, an ecologist at the
University of Wisconsin-Madison and one of the authors of the NRC
report. "You don't." At least not, she says, within the
timescale imposed by the Corps. Most mitigation sites are subject to
no more than five years of oversight, but some wetlands,
particularly forested areas, might take decades to replace
adequately the land lost to development.

According to Zedler, the primary obstacle is that although
scientists know that wetlands help regulate water cycles, serve as
water filters and provide habitat for diverse flora and fauna, even
specialists don't always know how they do it. William M. Lewis, Jr.,
an ecologist at the University of Colorado at Boulder, believes that
for now "we don't have any reliable way of replicating
functions and values."

A study published last year by Ohio's Environmental Protection
Agency supports these concerns. The agency studied 12
mitigation-banking sites across the state to determine how well they
mimicked natural conditions. The results weren't particularly
promising. Twenty-eight percent of the area surveyed consisted of
shallow ponds lacking rooted vegetation and could not be considered
functioning wetlands. Most of this acreage, however, had either
already been sold as credits or approved for sale.

The Ohio EPA also found that plant communities were generally of
lower quality than natural wetlands and more likely to be home to
invasive species. The banking sites scored even worse when judged by
the presence of amphibians. None provided habitat for either wood
frogs or spotted salamanders, which the report called indicative of
successful sites, and all were dominated by just a few species of frogs.

Of course, individual mitigation sites face all of these same
difficulties. But two factors add to the risks of banks. First, if
one small individual mitigation site fails, the effects on the
surrounding landscape should be minimal. The collapse of a large
bank site is a much more costly mistake. Second, whereas developers
who create their own mitigation sites are usually required to do so
in the immediate vicinity of the destroyed wetlands, mitigation
banks tend to be located farther from the impact sites.

At the same time, mitigation banking has a number of points in its
favor. For one thing, purchasing credits from a bank that has
already restored or created wetlands can reduce or eliminate the
time lag between the impact of development and the construction of
new wetlands. According to George Howard, co-founder of Restoration
Systems, a mitigation-banking company based in North Carolina,
there's another advantage to mitigation banks: "Unsuccessful
projects could bankrupt me personally," he says, "and
that's a great incentive to succeed."

Perhaps the biggest problem with individual mitigation is that no
one knows just how well it works. In 2005, the Government
Accountability Office issued a report showing that the Corps rarely
visited sites to ensure that required mitigation was being
completed. And in most cases, annual monitoring reports from the
permit recipients (usually a condition of approval) were never
filed. "Until the Corps takes its oversight responsibilities
more seriously," the report concluded, "it will not know
if thousands of acres of compensatory mitigation have been performed."

So although many wetlands ecologists don't share Howard's enthusiasm
for banking, there is agreement that, as he puts it, "the
alternatives are a sad, sad story." According to the Corps, the
drafted regulations are unlikely to change significantly before
being finalized later this year, which means that mitigation banks
will soon become an increasingly important part of national wetlands
policy. Whether that's a step toward "no net loss" remains
to be seen. As Zedler says, "there's a lot of promise in
mitigation banking, but it all depends on how it's done."